Correlation Between Crown and 00108WAF7

Can any of the company-specific risk be diversified away by investing in both Crown and 00108WAF7 at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Crown and 00108WAF7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crown Cork 7375 and AEP TEX INC, you can compare the effects of market volatilities on Crown and 00108WAF7 and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Crown with a short position of 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown and 00108WAF7.

Diversification Opportunities for Crown and 00108WAF7

-0.06

Correlation Coefficient

Crown  00108WAF7

Good diversification

The 3 months correlation between Crown and 00108WAF7 is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Crown Cork 7375 and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX INC and Crown is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Crown Cork 7375 are associated (or correlated) with 00108WAF7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX INC has no effect on the direction of Crown i.e., Crown and 00108WAF7 go up and down completely randomly.

Pair Corralation between Crown and 00108WAF7

Assuming the 90 days trading horizon Crown Cork 7375 is expected to generate 0.23 times more return on investment than 00108WAF7. However, Crown Cork 7375 is 4.44 times less risky than 00108WAF7. It trades about 0.21 of its potential returns per unit of risk. AEP TEX INC is currently generating about -0.05 per unit of risk. If you would invest  10,302  in Crown Cork 7375 on December 11, 2024 and sell it today you would earn a total of  317.00  from holding Crown Cork 7375 or generate 3.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.61%
Values	Daily Returns

Crown Cork 7375  vs.  AEP TEX INC

Crown Cork 7375

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Cork 7375 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Crown is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

AEP TEX INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days AEP TEX INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AEP TEX INC investors.

Pair Trading with Crown and 00108WAF7

The main advantage of trading using opposite Crown and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown position performs unexpectedly, 00108WAF7 can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in 00108WAF7 will offset losses from the drop in 00108WAF7's long position.

The idea behind Crown Cork 7375 and AEP TEX INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.